November 18, 2009

So Ontario has set course towards adopting the HST. While the HST itself seems to be this ominous change in the province's tax system that will screw over everyone by increasing prices across the board and force Ontarians into the poor house. At least, that is the portrayal that a couple media places would have you believe, such as Global. The truth is that we don't know what's going to happen. The theory behind this plan says the opposite but then again, theory doesn't always work out the way we expect.

The problem with their reporting on the issue is that the HST is one part, albeit a large part, of a bigger plan. However, talking about the entire plan and explaining the details doesn't make for nicely packaged sound bites. And apparently neither does explaining that this whole thing is a partnership with our federal government.

I had the opportunity to hear an MPP explain other parts of the plan as plain as possible. I will attempt to do the same here. First, let me say that I'm still taking a wait-and-see approach towards this entire plan (not that I have a choice since it's going ahead whether I agree with it or not). It can be explained simply without big numbers and jargon only a chartered accountant would understand but even then it's still long-winded.

One of the most common arguments being thrown out in favour of the HST plan is that corporations will save time and money by only having to do one set of taxes. That is true, but the real value doesn't exist there. The real savings for businesses is that much of the taxes that are paid through the supply chain will be neutralized.

What do I mean by 'neutralized'?

Let's consider a simple supply chain:

raw materials --> manufacturer --> wholesaler --> retailer

Currently, there is a tax paid between each sale. So when the manufacturer purchases the raw materials they pay tax on that purchase. When the wholesaler purchases the goods from the manufacturer they pay tax on that transaction. And so on. This tax often ranges somewhere 2% and 5%. And since each player wants to recoup the tax they pass this cost along to the next person by embedding it into the cost of the item. Using the above chain and 2% tax at each step, by the time the item gets into the hands of the consumer, 6% of the item's price is embedded tax passed upward along the chain by each player.

Given that the above supply chain is over-simplified the reality is by the time the consumer purchases an item and pays GST and PST, generally anywhere between 21% and 38% of the final cost is made up tax. Whether this is sales tax or tax already paid and being recouped by those in the chain, any given commodity is much higher than its true retail value.

In part, by moving to the HST, along with other changes, these embedded taxes should disappear. This is due to the HST being considered a value-added tax and therefore businesses along the supply chain not being subject to it or them being able to claim those costs back in taxes. So where we currently see about 21% to 38% of an item being tax, this will be scaled back to just %13 - the HST being paid by consumers. The theory behind this is that since businesses will no longer be paying those taxes, they will pass the savings along with their products effectively lowering the price of consumer goods.

This is where skepticism prevails as many just don't believe the savings will reach consumers. While it may take some time for those savings to be seen, there is much optimism within the Ontario Liberals that it will come. This optimism comes from that fact that there is serious competition for consumers' money in Ontario. Companies such as Wal-Mart, Zellers, Loblaws, and Canadian Tire are currently in a huge fight to bring costs and prices as low as possible to attract more customers. Once one of these companies take advantage of being able to advertise even lower prices, they will all follow suit. And once the discount retailers go, eventually the mid-level retailers will too. And so on. That's the theory, anyway. Considering the fight between Wal-Mart, Zellers and Loblaws especially, it's highly plausible it will work out.

Now services are another thing. And as far as I can tell, there is some nervousness amongst the Ontario Liberals over whether or not savings will be passed here. Since most service providers are less obvious about how they are affected by the supply chain, any savings they experience can be much easier pocketed. Even though their businesses taxes will be lower, the items they purchase will be cheaper, they don't have to do anything. Even though the theory is that any savings they experience will be passed along to customers to offset the newly applied 8% HST increase, they likely won't because there is much less pressure to do so. Instead customers just pay the extra 8% and claim they're paying more for the service due to taxes.

However, that is what the tax rebate and credits are for. Each of us will be getting $620 tax credit on our income and those that make under $80000/year will get a rebate for up to $1000. Between these two measures, any cost increase we see when paying for a service should be more than offset. In fact, unless we're spending more $12500 on services in a given year, we'll actually come out ahead. Or so goes the thinking on the part of the Liberals.

The biggest justification for the HST plan is that it brings our tax system in line with most European nations that are looking to Canada for trade and growth. Apparently our current tax structure is seen as a deterrent, either due to its complexity or the costs that are placed on businesses, goods and therefore consumers. By going to the simplified HST program along with the elimination of embedded taxes it makes Ontario a much more attractive place to invest which will in turn create jobs, competition, etc.

Long explanation but simply put. Even in simple terms - an explanation without big numbers, accountant-speak, etc. - it takes some time to talk about. The talk I heard took an easy 45 minutes and there was still more to discuss. Even here, I haven't touched upon everything. That makes it hard for the media to discuss as well. And even though I'm taking a cautious approach to judgment on this, I still find media like Global frustrating when they premise every HST news clip with 'the price on everything is going to increase' or 'prepare to pay more tax' when the reality has yet to play out.

November 05, 2009

Over at Macleans, John Geddes has put some perspective on the gun registry or CFRO. He points out that police used the CFRO over 9400 times per day last year, that police forces do find it useful and that it costs roughly $3 million per year to maintain. While it may not be the number one crime fighting tool to use, it is still another tool for police to take advantage of. He then asks, is that not enough for maintaining it?

When I showed Geddes' write up to a close acquaintance, who is an assistant crown attorney, they confirmed that the CFRO is used within the courts regularly as well. They said that before considering to grant bail to someone, such as an accused in a domestic assault, the CFRO is checked by the police. If the accused happens to have a registered gun in the house, then part of their bail conditions could require them to turn it in to the authorities. The crown may also ask to have an accused's surety checked through the CFRO to make sure the crown isn't turning a domestic assault accused over to someone else with a readily available weapon.

Why is this relevant? Because not all (many in fact) accused in domestic assault cases don't have prior records. Their actions are based on some sudden change in their situation or relationship. The argument that 'criminals don't register their guns' doesn't necessarily apply. Many law-abiding citizens, and possibly gun owners, who presumably would register, may have a sudden breakdown. Knowing if they have weapons readily available would be useful information for both the police and the crown when making decisions regarding such a person.

Depending on the scenario, the police do not necessarily have to enter into every scenario or deal with every accused with the full might of the police force. That's impractical, wasteful and unrealistic. But to have the knowledge that a gun is present can change the outlook and the planning of the police involved.

Do I think the gun registry is useful? Well if Canada's largest police forces, such as Toronto, Montreal and the RCMP are saying it's useful, then who am I to argue with them. And then throw in others from within the justice system such as crown attorneys, who also can find the information useful, then I'm left without any doubt.

That doesn't mean the system is perfect and that there isn't room for improvement or change. There surely must be a compromise that would make 'hunters and farmers' feel less like criminals - though I've always wondered how registering their guns did that - and still allow those who use such information for safety and preparedness to do so effectively and fully. Scrapping the system seems to be counterproductive and someone needs to step up and use their intelligence going forward in finding a solution.

November 02, 2009

Health Minister Leona Aglukkaq has blamed GlaxoSmithKline, the provinces and the public for the current issues surrounding the H1N1 roll out. Reality is, she doesn't have anyone to blame but herself and those involved in developing the plan.

We know that this plan has been in the works for months. Even as early as April Aglukkaq has been claiming the plan will be comprehensive and be as effective as possible in protecting Canadians. In August she restated this by claiming everything was ready and they were fully prepared for the virus. Presently, we know this not to be the case.

So what's wrong with the plan? It was based on assumptions, some based in reality though. But it didn't seem to consider common sense.

With traditional high risk groups, very young and elderly with underlying conditions, no one in the larger perspective bats an eye when a death occurs. However, it's well known that H1N1 targets groups that are not traditionally associated with the high risk and the flu. Groups such as healthy youth, young adults and pregnant women are vulnerable this time. Common sense would then tell us that if someone in one these groups were to die from the virus people are going to notice.

Common sense also would have told them that it was likely someone in the non-traditional groups would die. As it happens, several have died. And people noticed.

This is where we are at. While planning seemed to be based around polling, expected number of illnesses, production capacities etc., it didn't seem to plan for specific scenarios. This includes one that common sense should have alerted them to.

It doesn't matter how much (or in this case how little) you attempt to inform the public about giving certain groups will receive the first vaccine shots. And it especially doesn't matter that some polls said that as few as 30% of Canadians were even considering getting the vaccine. When someone like a 13-year old boy passes away even prior to the big roll out, people are going to panic and ignore whatever you told them. These people are going to flood clinics, worried that their child or themselves may be the next victim.

This whole issue also brings into question the judgment of Aglukkaq and et al to go with a single provider of the vaccine. It also brings into question their judgment to allow GSK to stop producing the adjuvanted vaccine for the non-adjuvanted version or to not have the non-adjuvanted version be produced elsewhere. Common sense would have would have should have told them otherwise, on all accounts.

If this government had only used their heads rather than seemingly relying solely on technocratic processes. Technocrats tend to live in a bubble, common sense exists and is grounded in reality. The H1N1 virus also operates in the real world and therefore the response needed to as well.

Not everyone is going to like this idea. There will be some in both the Liberals and NDP camps that will balk almost instantly at the notion. Conservatives most of all will sneer at it, mock it and say some outlandish things about it. Deep down inside, they'll likely fear it.

Political scientist, Michael Byers, isn't calling for a coalition but calls it a 'ceasefire'. This would mean the two parties will continue to be opponents during the election, offering their own platforms and they'll have no post-election power-sharing agreement. However, the parties, only once, will not run candidates against each other. The party that showed the most weakness in each riding will drop that candidate in favour of the other.

The rest of Byers' piece in the Toronto Star looks at the election reform issue, using this ceasefire as a way to draw attention to the issue.

I actually like the idea. I don't necessarily like it because it could potentially return the Liberals to power and defeat the Conservatives but that it may reboot Canadian politics in general.

Politics in Canada is riding a downward spiral into disrespect and disrepair. It's less about ideas then it is character assassination. It's less about governing for the people then it is about preservation of power. And due to its current condition the public is tuning out in droves.

I'm not going to lay the blame solely on the Conservatives for this situation. While I'm fond of Chretien's Liberal government they weren't saints by any mean as they didn't necessarily follow through on every promise or they promised too much. And Martin went the road of personality over substance. Both of these examples have been used and taken to the extreme by Harper who has also gone on to include much more brinkmanship, partisanship and cronyism. The proof of where all of this has led us is in the dwindling turnout of voters.

To reboot the system, beginning with an apparent gentleman's agreement, might reignite the interest and faith of the public in their government. It could be the return of optimism that your vote does matter and therefore honesty getting rewarded. This ceasefire would also likely put ideas, real ideas and policies, back in the spotlight rather than having debates about personalities or watching massive negative campaigns forced upon us.

All three major parties would have to focus on these aspects because the dynamics would change significantly. Mainly, they would need to truly earn a vote from the people. Many supporters will be skeptical (especially Grit and Dipper supporters) about voting for one another. Both of those parties will have to give people a reason to support them rather then jumping to the Greens, Conservatives or just staying home. The Conservatives in turn will need to give skeptical Liberals a reason to support them as well, as there will be an opportunity for right-of-centre Grits to seriously feel wary about this arrangement. Ideas, integrity, true leadership (not the drivel espoused by the likes of Martin and Harper) and honesty will be have to be at the forefront, both during and after the election.

The dynamics also change in the sense that, in theory, this could expose how real democracy should be played out in this country. What I mean is that voters actually choose winners and the ending seat allocation on the Hill reflects the will of the people and could raise the question of election reform in a serious way. This is something that Byers seems to imply and is seemingly part of his m.o. for writing this piece. Democratic reform puts a lot at stake for all parties in Canada. Liberals, Bloc, and Conservatives, traditionally, have wanted to avoid it, while NDP and Greens would ultimately benefit. Again, whatever the outcome someone would have to prove it's unnecessary or they will show that it's required.

Too long have Canadians dealt with rhetoric, deception, shell games, brinkmanship and never-ending election periods. It's time to refocus on governing, ideas and making this country as strong as possible for all Canadians. A reboot of politics and government is exactly what Canada needs.

"First it is necessary to stand on your own two feet. But the minute a man finds himself in that position, the next thing he should do is reach out his arms. " ~ Kristin Hunter

"When you're a mayor and you have a problem you blame the provincial government. If you are provincial government and you have a problem you blame the federal government. We don't blame the Queen any more, so once in a while we might blame the Americans." ~ Jean Chretien

"Which is ideology? Which not? You shall know them by their assertion of truth, their contempt for considered reflection, and their fear of debate." ~ John Ralston Saul

"It is undoubtedly easier to believe in absolutes, follow blindly, mouth received wisdom. But that is self-betrayal." ~ John Ralston Saul

"Everybody dies, Tracey. Someone's carrying a bullet for you right now, doesn't even know it. The trick is to die of old age before it finds you." ~ Cpt. Malcolm Reynolds (Firefly, Episode 12)